Democrats torn between Obama, financial industry on DOL fiduciary rule

Latest letter threatens to slow the rule-making process while time runs down on the current administration.

Some Capitol Hill Democrats are torn between President Barack Obama and the financial industry over a Labor Department proposal that would change investment advice standards for retirement accounts.
In an Oct. 30 letter to DOL, 47 House Democrats called on the agency to open a 15-30 day comment period after a final rule is promulgated, likely early next year. They assure DOL that such an accommodation can be made “without disrupting your intended timeline of implementing the rule by the end of 2016.”
The extra comment period would slow down the rule though, as the Obama administration tries to get it in the books before it leaves town in early 2017. Tapping the brakes is something the financial industry wants to do, and now it has nearly four dozen Democrats echoing its stance.
This latest letter is much more of a threat to the DOL rule than previous letters from Democrats. One that was signed by 96 House Democrats called for specific changes in the rule. That call coincided with the agency’s promise it would listen to feedback and make changes.
The Oct. 30 letter is an example of Democrats bending over backward to help the financial industry without directly opposing the rule, which Mr. Obama strongly supports.
All but three House Democrats recently voted against a bill that would have halted the DOL rule. But now Rep. Jared Polis, D-Colo., who gave a floor speech in opposition to that bill, has taken the lead on the Oct. 30 letter. The industry didn’t get a vote. But it did get a letter.
“It’s either unbelievably naïve to think [another comment period] doesn’t disrupt the process or something much more cynical is going on here,” said Barbara Roper, director of investor protection at the Consumer Federation of America.
The House Democrats who signed the letter say DOL should get feedback on any modifications it makes to the rule.
“You would then be able to make final changes based on this short comment period, and presumably finalize the rule,” wrote Mr. Polis and 46 of his Democratic colleagues.
Mr. Polis and many of the Democrats who signed the letter have as one of their top five industry donors “securities and investment” or “insurance” or both for the 2016 election, according to the Center for Responsive Politics.
The Securities Industry and Financial Markets Association and the Investment Company Institute have each made campaign donations to 12 of the Democrats on the letter. The Financial Services Institute, which has a much smaller political action committee, has donated to two of them.
The language of the letter repeats industry concerns about “unintended consequences” of the rule for “low- and middle-income American families” seeking financial advice.
Of course, on the other side, interest groups with a lot of money to spend on campaigns (e.g., AARP) are lobbying lawmakers, too.
There’s nothing illegal, unethical or immoral about taking campaign contributions from the financial industry or consumer groups and then listening to their policy concerns. Such activity, in fact, is constitutionally protected — and creates a cacophony on Capitol Hill.
“What we need is the DOL to take the time and get the rule right,” said Dale Brown, FSI president and chief executive, on the sidelines of an FSI conference in Washington on Tuesday. “Every voice helps.”
The extra comment time would come on top of two comment periods that have been conducted since the rule was proposed in April. Those solicitations drew more than 3,500 letters. The agency also conducted four days of hearings on the rule in August.
The DOL declined to comment on the letter.